Michelle Singletary's 'Money Milestones' For Your 30s

Critics disagree about whether public investment in hedge funds is a good idea.
( Daniel Grill/Getty Images )

[music]

Brian Lehrer: Brian Lehrer on WNYC. For this membership drive week in addition to the news and issue conversations we have every day, we're doing a few special series, including one will continue right now with Washington Post personal finance columnist Michelle Singletary, who has a great series, called Michelle Singletary's Money Milestones For Every Age. She goes decade by decade, and we are going there with her. Today it's Money Milestones for People in Your 30s.

We did 20s yesterday, whether it's you for yourself, or maybe if you have adult children in their 30s. Tomorrow, we'll do the 40s and keep going up from there. Michelle is also the author of books on personal finance, including her latest which came out last year called What to Do With Your Money When Crisis Hits: A Survival Guide. Michelle, yesterday was great for people in their 20s I know the callers who were on really appreciated your advice. Welcome back to WNYC.

Michelle Singletary: Oh, thank you for having me back. It was a great conversation yesterday. I was so glad to have a call from a 23-year-old. It's like, "Yes."

Brian Lehrer: Absolutely. You gave him a little tough love there too but I think you gave us something to think about. Listeners, we can take some money management questions today relevant to people in your 30s. Like I say, for yourself or anyone else you're interested in who's in their 30s. 212-433-WNYC. That's our on-air line, not our money donation line. We're never going to ask you for a pledge on the air. 212-433-WNYC, 212-433-9692 or you can tweet a question for Michelle @BrianLehrer. You've got a column called Is Graduate School Worth It? It's largely a cautionary tale. Obviously, it depends on the person in your career but you tell us grad school often produces more student loan debt than four years of undergrad does how so?

Michelle Singletary: That's right. Lots of people are managing to get through graduate school, maybe with the average of about $30,000 in debt, but grad school, they're leaving with about $71,000 on loans on average, according to bankrate.com. Many advanced degrees don't produce the substantial this many, and you expect your income going to go up right away but that's not always the case. In some fields, it is but in many it doesn't.

I was working with a young couple, and the husband was in grad school to try to switch careers and was going to end up spending about $100,000 for that grad school degree from a marquee school, because I said, "Well, how do you know that's going to pay off and who told you that?" He said, "Well, I talked to the school administrators." I said, "Did you talk to anybody in the field? Do you need this degree?" Silence? I said, "Well, how much more can you make, and how was that you've got this debt? How long is it going to take you to pay off that debt?" Silence.

I actually talked him out of finishing that degree program. Guess what, in a year he got the job that he wanted and the new career he wanted without that $100,000 in debt.

Brian Lehrer: Do your research outside of the people in the department you're applying to or considering applying to because they're like salespeople in that context, right?

Michelle Singletary: That's exactly right. I have a graduate degree. I have a master's degree in business from Johns Hopkins University, I wanted to go to just get the education, but it did not boost my salary, not $1 but I paid cash for that degree. At that time my company was helping pay for it. For me, it was the attainment of the education I would not have done it had I had to take out loans. My husband's the same thing. He's got an MBA, his company helped pay for it, but we pay for cash for it. Now it helps increase his management knowledge but in terms of direct impact on he got the degree he got a pay raise, no.

Brian Lehrer: Let's take a phone call. Gary in Springfield New Jersey, you're on WNYC with Michelle Singletary. Hi, Gary.

Gary: Hi Lehrer. Gary Cohn here. I have a deposit down on a rental unit and a single-family home. I'm also considering buying my own house. I'm wondering if you have any advice on to which one should typically come first.

Brian Lehrer: You've got a whole column on that Michelle called Are You Ready to Be a Homeowner right?

Michelle Singletary: That's exactly right. Gary, I take it you're renting now. Is that right or?

Brian Lehrer: One second. I have to get Gary's line back up. This is my clicking error. There he is. Hi, Gary.

Michelle Singletary: Hi Gary.

Gary: Yes, I am currently renting but I figured that, even if I'm renting if I have a single-family home, that I'm renting somebody else, and I'm still [unintelligible 00:05:15]

Michelle Singletary: You want to do it as an investment as opposed to a place to live?

Gary: Well, true. I have a signed contract for a rental unit in the Midwest but I'm still renting here in New Jersey.

Michelle Singletary: Gary, I would do a lot of research about that. What happens if you go a couple of months without a renter? Can you carry the property for a couple of months, six months even?

Gary: I can.

Michelle Singletary: That might work for you. I would just say work the numbers. I like passive income. I like income that comes in and I don't have to do a whole lot. If you have a situation where maybe the renter does some damage to the property, do you have the money to pay for that? Talk to other people who are in the business of rental properties, and that investment and make sure you understand what is going to be the return on your investment.

Are you going to be able to put money aside for insurance and like I said, damage? Because quite frankly, Gary, you could probably earn as much by just putting money in a low-cost index fund and then you don't have to worry about renting out anything, especially several states over.

Brian Lehrer: Interesting. Gary, thank you for your call. Let's go on to Lydia in Washington Heights. You're on WNYC. Hi, Lydia.

Lydia: Hi, thanks so much for having me on. I had a question about retirement savings. I spent a lot of my 20s in that hamster wheel of freelance jobs. Once I landed in Corporate America, I felt like I had a lot of time to make up for and building back those retirement savings. I'm currently contributing 15% to a Roth IRA, and 15% to a 401(k). I would just love some guidance on, is that smart. Is there a better way I should be doing it?

Michelle Singletary: Oh, Lydia I'm going to hire you to teach some of my classes.

[laughter]

30% of your income is going towards retirement savings, is that what you're saying?

Lydia: Yes.

Michelle Singletary: That's great.

Lydia: We live very frugally.

[laughter]

Michelle Singletary: That's wonderful. I love that you split it between a Roth so you put money in a Roth after-tax basis. When you pull the money out it's not tax, and then the traditional, you put it in pre-tax so that gives you some current tax savings. I'm happy to tell you anything you can help me right in my [unintelligible 00:07:53]

[laughter]

I will say this Lydia because my husband and I found this out when we were doing our net worth statement. We're aggressive retirement savers just like you, but you know what we found out that we were actually too aggressive because we weren't using some of that income to live now. I heard you say that you live very frugally. That's great but I hope that you're carving out some part of your budget to have some fun, to take vacations, do some things now.

I love that you're saving for later but live a little now. That's something that I struggle with. We refigured our budget a little bit because we had so much about income going towards retirement, that there wasn't enough to do the things that we'd like Backhouse, we see a couch we want, we just pride pay cash for it. We kind of pull back just a little to make sure that we're also living now.

Brian Lehrer: Lydia, I hope that-

Lydia: That's so helpful. Thank you so much.

Michelle Singletary: You're welcome.

Brian Lehrer: Lydia, thank you so much. Before we run out of time for today, and as I say, we will continue with Michelle Singletary through the week, part of the generational programming that we've been doing on the show, all this year. We saw that she has been on the show before and always gives great advice and has perspective on the issues with respect to money as well. Has this great website that goes up the decades by age. We'll touch on one other question that you have for people in their 30s. That is, Am I ready to have kids? You mean financially ready of course. Are there metrics for that?

Michelle Singletary: Yes. Listen, lots of people think I'll never be able to afford kids but if you look at it straight that way, none of us will because the government says from the time the kid is born to about 17 you get to spend about $300,000 with all the things that cost to raise a kid. What I usually tell people is, I don't want to dictate when you have kids, that's a private decision, but do look at the numbers. Look and make sure that if you are both working you can afford daycare and the kind of childcare that is good for you where you are. You also look at what if one of you wants to stay home. That happens a lot of people, this little baby comes in and you thinking, "I don't want to leave my kid." Can you afford your lifestyle on one income? Run the numbers. I say about a year or two out from when you decide you want to start having a kid, pretend that you have a child, and then put the money that you would spend for that child in a bank account and see how it impacts your budget.

If it's tight, like super tight and you've got to borrow on a credit card, then you may need to spend some time saving to prepare for when that child comes, especially the first few years if you're going to have to use childcare, because that's the most expensive when you have to go to work and leave them with someone.

Brian Lehrer: We'll keep sampling all this week from Michelle Singletary's Money Milestones For Every Age series. Tomorrow it'll be four and about people in your forties. Michelle, thanks for today.

Michelle Singletary: Oh, thank you for having me again.

New York Public Radio transcripts are created on a rush deadline, often by contractors. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of New York Public Radio’s programming is the audio record.

Produced by WNYC